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March 1, 2013

Trouble with Third-Party Dealmakers

by uvapreston

A few weeks ago, we discussed various third-party services offering point of sale deals.  Some of us were skeptical about the long term success of this increasingly saturated market.  Potential roadblocks include consumer confusion in the face of many options and simply overcoming the inertia that prevents adoption of an unfamiliar service that only offers limited benefits in select establishments.  The above article discusses the erstwhile status of a similar entity, Groupon, known for offering daily deals to local establishments.  Groupon’s stock has tanked in the wake of poor results in Q4, during which the company lost $81.1 million.  Significantly, the article notes that a major source of difficulty stems from the growing cost of revenue.  This condition can be attributed to problems drumming up new and repeat clients as well as declining revenue share on each deal.  Groupon’s business model and product offerings are not inherently consistent and thus partnerships with businesses and customer retention may be hard to sustain.  In addition, as more companies adopt a multichannel approach to customer interaction, they may build in promotions that speak directly to their patrons and foster loyalty.  As a result, both businesses and consumers may find it unnecessary to turn to third-parties such as Groupon to participate in an enticing deal market.

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